"veggie burgers stink. Eat more chicken"
Posted on 09/04/2003 12:57:32 PM PDT by Brian S
Thu September 4, 2003 03:35 PM ET By Bob Burgdorfer
CHICAGO (Reuters) - The U.S. cattle industry is enjoying one of its best years ever -- even if it's largely at the expense of its huge trading partner and neighbor, Canada.
U.S. cash cattle prices traded this week near the record highs last seen a decade ago, and feedlots are now raking in unheard-of profits of $150 to $200 for each fattened steer and heifer they sell to beef plants.
High cattle prices and significant profits are likely to continue through the balance of the year, analysts said, because cattle supplies are forecast to remain tight well into 2004.
This is a sharp contrast to the past two years, when a glut of meat and a struggling U.S. economy hurt demand for beef and had cattle producers losing up to $100 on each head of cattle.
"This is going to salvage some people who were on the brink of going under," said Jim Gill, director of marketing for the Texas Cattle Feeders Association.
Slaughter cattle traded at $85 per hundred pounds this week in Texas, Kansas, and Oklahoma, three of the nation's top cattle-growing states. Cattle also traded at $85 in March 1993 -- but that was after a bitter winter killed many cattle in the Plains and beef plants had to bid aggressively in a scramble for the smaller supply of healthy animals.
This year's rise has been driven in part by a strong appetite for beef in an improving economy. But the major reason has been the ban on imports of cattle and beef from Canada after a case of deadly mad cow disease was discovered in Alberta in May.
Last year, Alberta alone shipped 500,000 cattle to the United States for fattening and slaughter. Canadian feedlots say they have been losing almost $200 per animal since the ban.
CANADA BAN HAS CUT U.S. CATTLE SUPPLIES DRASTICALLY
The number of cattle on U.S. feedlots on Aug. 1 was 9.585 million head, down 5 percent from last year and the lowest in four years, according to the U.S. Agriculture Department.
"You take away 7 percent of your supply overnight and that is always supportive," Gill said of the price effect that the U.S. ban on Canadian cattle and beef has had.
Canadian cattle imports have been banned since May 20. But last week the U.S. said it would start allowing in some Canadian beef from cattle under 30 months old, because the meat is thought to be at low risk of containing the disease.
"U.S. officials want it (inspection) done before the animals are in the slaughter plants. It's going to delay any kind of free-flow of beef into the U.S," Chuck Levitt, senior livestock analyst for Alaron Trading Corp, said of the move.
The demand for beef from the U.S., where mad cow disease has never been diagnosed, rose not only domestically but also abroad after May. Top export markets like Japan and South Korea also banned Canadian beef and turned to the U.S. instead.
U.S. beef exports this year through Aug. 28 had risen to 613,400 tonnes, from 588,000 tonnes a year earlier.
EVEN HIGHER PRICES AHEAD?
"I think we are at the outer limits right now, but I thought that a couple of dollars ago," Bob Anderson, livestock analyst at Des Moines, Iowa's Commodity Services Inc., said of cattle prices.
Beef plants are also earning healthy profits now, because they are easily selling the beef into domestic and export markets at near-record-high wholesale prices. As long as that continues, cattle prices should stay high.
"As long as the beef packer's profit margin is large, he really doesn't care where the cattle price is. He just wants to process more cattle," said Anderson, a former feedlot owner.
This week, beef plants on average enjoyed a profit of more than $50 for each head of cattle they processed.
"It is historically a wide margin for this time of year," said market analyst Andrew Gottschalk at HedgersEdge.com.
Speculators have also made their own stampede in the cattle markets. Cattle futures at the Chicago Mercantile Exchange reached 86.70 cents per pound on Thursday, the equivalent of $86.70 per hundred pounds. That is the highest price for any CME live cattle contract in the market's 39 years of trading.
"veggie burgers stink. Eat more chicken"
When we lived out West, my wife and I used to raise "drop calves", and sell them at auction. So I remember that the price of prime feeder cattle was around 75-95 cents per pound back in the late 70s.
Until recently, it was exactly the same, although the price of everything else has gone up five-fold.
I just don't know how the ranchers survived. Beef in the stores has gone up five-fold, feed costs have gone up five-fold, property taxes have gone up five-fold, but the price of a 400 lb. steer has remained the same all these years.
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